The Securities and Exchange Commission (SEC) launched a legal missive against messaging app Kik, beating them to the punch. The regulatory body sued the app for conducting an illegal $100 million securities offering of digital tokens. The SEC alleged that Kik sold the tokens to U.S. investors without registering their offer and sale as required by the U.S. securities laws.
The animosity between the SEC and Kik had been brewing for a while and matters had come to a head when the latter launched a Defend Crypto campaign against the former. Earlier Crypto-News India had reported that the campaign had stated, “In January 2019, Kin came out publicly to share what has been going on behind the scenes with the Securities and Exchange Commission (SEC). This has been a burden for not just Kin, but many others in the space who are optimizing for regulation before innovation. Everyone is always asking “what will the SEC think?” instead of “what is best for consumers?”
It further added that, even though 300,000 people use Kin as currency, the SEC thought that Kin was a security. It said, “After months of trying to find a reasonable solution, Kin has been unable to reach a settlement that wouldn’t severely impact the Kin project and everyone in the space. So Kin is going to take on the SEC in court to make sure there is a foundation for innovation going forward.”
The press release from the SEC said that Kik sold its “Kin” tokens to the public, and at a discounted price to wealthy purchasers, raising more than $55 million from U.S. investors. The complaint alleged that Kin tokens traded recently at about half of the value that public investors paid in the offering.
Steven Peikin, Co-Director of the SEC’s Division of Enforcement, said, “By selling $100 million in securities without registering the offers or sales, we allege that Kik deprived investors of information to which they were legally entitled, and prevented investors from making informed investment decisions. Companies do not face a binary choice between innovation and compliance with the federal securities laws.”
Additionally, Robert A. Cohen, Chief of the Enforcement Division’s Cyber Unit, stated, “Kik told investors they could expect profits from its effort to create a digital ecosystem. Future profits based on the efforts of others is a hallmark of a securities offering that must comply with the federal securities laws.”
Earlier this year, the SEC had issued a Wells notice, signed by Robert Cohen, Chief of the Cyber Unity of the Division of Enforcement. It stated that Kin, a cryptocurrency developed by Kik, might face civil injunctive action, a permanent injunction, disgorgement, prejudgment injury, and civil money penalties for violating Sections 5(a) and 5(c) of the Securities Act of 1933.
Liked what you read? Join us on Telegram